Student loan crisis: causes and solutions

Student loans have been part of the college financing mix for a long time.

The detail that is getting so much attention in the national headlines and social media is in the staggering amounts of student loans that college students and recent graduates have taken out in recent years.

The public discussion typically focuses on two questions: “How did this happen?” and “What can be done about it?”

Monroe on a Budget special report

That’s why my special report for The Monroe Evening News and Monroe on a Budget for summer 2012 was on the student loan crisis. This is the reader pitch I sent out on our news and social media feeds:

I am working on a special report on student debt for The Monroe Evening News and Monroe on a Budget.

The topics will include how and why today’s college students got caught in a perfect storm of bad financial circumstances, what it will take for them to pay down high loan balances, and what can be done to lessen the debt burden for future students.

If you are a current college student or recent graduate in Monroe County, Mich., or parent whose student is in that demographic, I’d like to hear from you and include your family’s experiences in the news coverage. Contact me, Paula Wethington, at (734) 240-5745 or at paula@monroenews.com.

The special report was published in The Monroe Evening News Sunday Aug. 12. Here are the links on our newspaper’s site:

In the meantime

As I started project, I began this sidebar to link up to related articles from the archives of Monroe on a Budget and various news and research organizations.

I was particularly interested in the Michigan angles. I also was particularly interested in those who were in college or graduated during the recession. Those economic circumstances had a huge impact on how college students paid for their expenses or could pay back student loans.

Another detail I was aware of is that CNN called 2008 “the most competitive year ever for college admissions” with a record number of applicants for fall semester slots. The high school class of 2008 who finished a university degree in four years would have been in the college graduation class of 2012.

I’ve also been watching this situation from the perspective of a parent. My daughter graduated from high school in 2007, earned her bachelor’s degree in 2011, and earned her masters degree in 2013.

The background

These links include discussions on the collapse of the Michigan Promise Grant in 2008, the impact that the recession had on parents’ finances and scholarship funds, the changes that happened to federal student loans in 2010, shifts in the private student loan market in recent years, and the trend of college internships becoming unpaid opportunities rather than money-making ones.

College dropouts

The financial implications of dropping out of college, or even stopping out for a short time with plans to return, need to be considered in any discussion about student loans.

Students pay for or finance their classes at the start of each academic semester. As they do so, they are using up grant or scholarship eligibility and any financial resources that are available from the family. For many students, this process also includes signing loans.

Those who never finish will have no degree to show for their effort, but still need to repay any loans they took out.

Those who return after time away from school sometimes have to repeat classes, choose a different major, or learn that their degree program has changed requirements and they have to backtrack or add more classes. Those extra classes and / or lost credits contribute to the cost of earning the degree.

What’s happening now

These links include national and Michigan headlines about the debt load that students have been graduating with in recent years, the student loan interest rate decision in late June, the job market these students landed into, and the Student Loan Forgiveness Act proposal.

Alternatives to loans

There is a very short window of opportunity each year to find free money through grants and scholarships. I am surprised as to how many stories I’ve heard of students who either neglect the deadlines, or think a $500 scholarship isn’t worth the effort. This link list also includes a discussion on the Section 529 plans:

For a more detailed discussion about how and where southeast Michigan students can find scholarships and grants, go to my Cash for College page. Those newspaper and blog articles were timed in conjunction with financial aid and scholarship season for the 2012-13 academic year.

Later reporting

The following articles on this topic were written after the summer 2012 project: